Knowledge Library

Getting Formula One Sponsorship Back on Track

Formula One is a massive sporting event, attracting a global
audience of over 500 million people and reportedly generating revenue of $3.5
billion per year.

It is therefore easy to understand why companies would want
to become involved in the sport. Even retired World Champions such as Nigel
Mansell still carry valuable brand equity from F1, as proven by his recent
appearance in car
insurance commercials in the UK.

However, in recent years the number of companies involved in
Formula One has reduced. Massive global brands such as BMW, Toyota and Panasonic
all decided that the financial investment required were not worth it given what
they were getting in return. So, is Formula One sponsorship no longer
attractive to companies?

The
beginning of Formula One sponsorshipOne of the obvious benefits that companies are aiming to
derive from sports sponsorship is brand awareness. This is why in the 1960s
Gold Leaf cigarettes became the first company to sponsor a Formula One team
when their brand logos were emblazed onto the side of the championship winning
Team Lotus cars.

The basic level of thinking was that if a consumer went into
a store to buy cigarettes, they would be more likely to buy the one with the
recognisable brand than one they had never heard of.

As more companies followed Gold Leaf into the F1 it became
more difficult to stand out. Marlboro recognised this and ploughed millions of
extra dollars into the sport in order to ensure that their sponsored teams
featured the best drivers.

This led to Niki Lauda coming out of retirement to join
McLaren in 1982 and also Michael Schumacher joining Ferrari from Benetton 14
years later.

Marlboro had realised that differentiation was possible
through fan affiliation, and recognised that the sports most prominent stars
generally had a larger positive following. The general belief was that fan
affiliation would then be transferred onto the sponsoring brand, making these
consumers more likely to buy Marlboro cigarettes.

The
crowded marketDespite Marlboro’s strategy of utilising fan affiliation,
companies continued to plough into the sport following the Gold Leaf method of
placing a logo on the side of a car and relying on this to lead to brand
awareness and recognition.

However, by the end of the 1990s the number of companies
involved in the sport had become excessive and companies gradually began to
realise that a small logo placed on a Formula One engine cover would not be
guaranteed to be spotted amongst all the other brands featured on the cars
bodywork.

The events of September 11th forced companies to
rethink their marketing strategies, and many companies involved in Formula One
simply decided to end their sponsorship programmes in the sport as their was
not enough evidence that it was working.

This led to the loss of companies such as Orange, FedEx and
Benetton. Teams began to struggle as sponsorship investment plummeted, leading
to the collapse of the Prost and Arrows teams in 2001 and 2002 respectively.

The marketing world was changing, and techniques were
becoming ever more sophisticated. Brand awareness and fan affiliation were no
longer sufficient, as the new buzzword was integration.

Every message emanating from a company had to be aligned to
the company’s key aims and purpose. This means that it would make no sense for
an anti-smoking organisation to sponsor a tobacco endorsed F1 car as the mix up
in messages is clear and would only pollute the anti-smoking organisations
desired image. Sponsors were therefore beginning to search for a team, which
would reinforce their brand image, which obviously limits their options.

A team with a very specific identity, such as Prost who were
very much keen to remain true to their French origins, were always likely to
struggle in their attempts to source sponsors from anywhere other than their
home country. This was made particularly difficult by the fact that the
majority of companies involved in F1 have an international presence.

The
changing business modelOne of the first team owners to realise the need to craft an
image, which would appeal to specific sponsors, was Ross Brawn. Brawn had
formerly been the team manager at the Honda F1 team, but the Japanese
manufacturer ultimately decided that they could no longer warrant the financial
investment in light of their lack of success.

The sport was simply not allowing them to support their
image of technical excellence. Brawn bought the team for about $1 in order to
avoid the complete closure of the operation and gained access to Honda’s 2009
car, which had been developed intensively throughout 2008 along with Honda’s
2009 season budget, which would otherwise have been spent on redundancies.

This lucrative financial state was not disclosed to
journalists or fans as Brawn began to highlight the squad’s sponsors-less
livery to build the team up as the 2009 underdogs.

Brawn knew one man who would be enticed by this image was
Richard Branson. Branson had built his Virgin Company on the back of an image
of being the underdog challenging separate industries established players. This
appeals to consumers in countries across the world, and Branson does what ever
he can to encourage this image of him being seen as a modern day Robin Hood.

Branson knew that sponsoring Brawn GP would be another
communication outlet in which to demonstrate his brands underdog persona and
became the main sponsor of the team for 2009.

Brawn GP team went on to win the 2009 world championship,
resulting in masses of media coverage and television airtime. Branson’s deal
was universally hailed as a masterstroke as his brands desired underdog image
had been supported and fan affiliation had grown.

However, Brawn sold his team to Mercedes prior to the start
of 2010 and their driver line up of championship virgins Jenson Button and
Rubens Barrichello were replaced with the sports most successful driver Michael
Schumacher and his compatriot Nico Rosberg. The underdog image had been
replaced with a German image of precision and success.

Branson knew that there was nothing to be gained through
supporting the team for another season and decided to switch allegiance to
Manor GP, which would be one of the new comers for 2010 utilising a pioneering
car design technique, with their chassis entirely designed using CFD (Computer
Fluid Dynamics) rather than the traditional technique of wind tunnels. Branson
would once again be communicating his brands underdog image.

The
Digital AgeWe are now firmly within the digital age, an era in which
communication over large distances is an every day occurrence. Companies no
longer just communicate marketing messages through sponsorship, television
commercials and poster campaigns due to the fact that all three communications
outlets have become overly crowded meaning the individual company messages are
getting crowded out in the noise.

Increasingly, companies are utilising new methods of
communications available in this new era such as social media. An increasing
number of companies have their own unique Twitter profiles or Facebook groups,
which communicate company messages and information to followers and fans. This
is helping them to build the brand image they desire.

However, it isn’t just the sponsors who are utilising this
media. Most Formula One teams are using these websites to communicate with
Formula One fans about their activities and plans for the season. This has
enabling them to craft unique images for their team which helps them to stand
apart from their rivals.

For example, McLaren are not just a Formula One team with
Lewis Hamilton as a driver, they are a multiple championship winning team with
masses of history keen to be as precise and leading edge as possible. Manor GP
however are very much learning as they go in the sport, this along with their
pioneering car design techniques very much places them as the sports underdog
outfit.

These messages are communicated by the teams to the world
via these social media websites, making it far easier to understand Virgin’s
decision to sponsor Manor, and Vodafone’s decision to sponsor McLaren given
their desire to be seen as technically more advanced than their rivals in the
telecommunication market.

CommunicationThe increasing number of communication channels means that
integration of message is more important than ever before. It could therefore
be seen as a burden in a lot of respects, as it makes it much easier for
companies to slip up and give off signals, which will ultimately pollute their
carefully crafted image.

However, it is also possible to view it as an opportunity to
further strengthen messages or even to highlight facts, which would otherwise
have gone unnoticed. This is never truer than in sports sponsorship, as it is
generally believed by marketing academics that in the new era of crowded
sponsorship markets, an association to a sponsored entity has to be highlighted
in other forms of communication.

Spanish banking group Sandtander for instance are another of
McLaren’s sponsors alongside Vodafone. With their similar red and white
branding to that used by Vodafone, it is easy for Santander’s sponsorship
association to go unnoticed amongst the masses of Vodafone logos on McLaren’s
cars.

However, Sandtander has wisely utilised McLaren’s Lewis
Hamilton in their television commercials highlighting their association with
McLaren. This ultimately helps them highlight to consumers the image that they
are seeking to engender through the association; something which might not
otherwise have been obvious to people who do not watch the sport.

This could therefore be considered a lifeline to Formula
One, as sponsoring a team no longer just helps craft a desired image in the
eyes of the sports viewers; it also influences the perception of the great
majority.

However, one of the dangers of this technique has been
highlighted by the fact that Vodafone has also utilised Hamilton and McLaren in
their own advertisements.

It is therefore more than likely that this will confuse
consumers, and perhaps associates messages from both companies with a single
brand, which could ultimately damage that brands image.

This can be considered to be one of the drawbacks of the new
age, in that there are now so many communication outlets and messages flowing
that it is difficult to assign the correct message to the correct company.

Is F1
sponsorship effective?One of the inherent problems with marketing is that it is
very difficult to measure success, with many of the benefits being largely
immeasurable due to them being processed subconsciously.

Nevertheless, it was recently calculated by Formula Money
that Red Bull’s ownership of two teams which have been heavily branded with the
company logos along with their championship success means that Red Bull
branding featured in a remarkable 30.5% of Formula One’s total television
broadcast images during 2010.

Given that Formula One reaches approximately 520 million
people globally each year, it has been calculated that this level of television
broadcast time would cost a company $358.5 million in traditional television
commercial campaigns.

This makes Red Bull’s $240 million annual Formula One
operating budget appear to be remarkable value for money especially when
elements which are more difficult to measure, such as fan affiliation, are
considered.

However, 141 different companies sponsored a Formula One
team in 2010, and it is doubtful that all of these companies got the value for
money they were expecting. Utilising Formula Money’s technique, it would be
calculated that online trading company XTB got just as much television coverage
as Vodafone did due to them both being featured on the bodywork of McLaren cars
in 2010.

However, with such extensive and noticeable Vodafone
branding can anyone honestly say that they noticed the XTB logos?

It appears that in order for Formula One sponsorship to be
effective, a company needs to monopolise the external decals of a car and have
the team crafted to support the company’s specific brand image.

This once again supports Branson’s technique, as by buying
shares in the Manor GP team, which was renamed Virgin and featured Virgin logos
all over the car, he is not only ensuring that his company logos are noticed
but also ensuring that the team exactly matches the image he wants his brand to
portray.

Formula One sponsorship is no longer as simple as a Gold
Leaf logo on the side of a car but still has the potential to be effective to a
smaller number of companies.

SummaryMarketers can learn many lessons from the fast paced world
of Formula One.

In summary, here are the six key learning’s from this
analysis which invariably apply to any type of sports sponsorship:

A logo is
no longer enough: Placing a logo on a sponsored entity used to be
enough to ensure brand awareness and recognition, but in an increasingly
crowded market place this is rarely possible.

Fan
affiliation is powerful: Fan affiliation is undoubtedly a very powerful
benefit of sports sponsorship, which is difficult to repeat in any other kind
of marketing activity.

Choose
wisely: Your brand image should be strengthened by the association
to the sponsored entity due to its own brand image. Branson’s switch of
allegiance away from the more successful Brawn/Mercedes team to the far less
competitive Manor GP outfit is evidence of the importance of this. Remaining
loyal to Brawn’s team would only have damaged the Virgin brand in light of the
arrival of Schumacher and Mercedes Benz.

Integrated
communication is vital: Regardless of your opinion on whether it is a good
thing or not, the digital revolution is in full flow there are now more
communication outlets than ever before.You can’t control what other people say, but the messages emanating from your
own company should be perfectly in sync and integrated so as to strengthen your
image and avoid confusing consumers.

Utilise
social media: Social media is here to stay and it should be embraced.
This can be an incredibly powerful tool, which can help aid brand image
formation and engender a certain degree of fan affiliation. It can also be a
great tool to help fathom the brand image of your rivals or potential sponsored
entities.

Don’t
sponsor in isolation: Linking into the importance of integrated
communications and the fact that a logo is no longer enough, sports sponsorship
will be infinitely more effective if the association is utilised in other forms
of marketing communications such as television commercials or poster campaigns.

Even competitions could be linked to the sports
sponsorship, with the potential to give away tickets to the event.

Sponsorship is the business link between commercial companies and events or activities, through the provision of funds and services to achieve a predetermined marketing and communication objective. Primarily this tends to be the corporate or brand exposure via the media and in addition, superb PR, promotional and business returns, which benefit the sponsor's internal and external relationships